Commerce Minister Piyush Goyal has briefed the Union Council of Ministers on the country’s decision to not join the Regional Comprehensive Economic Partnership (RCEP) . On Wednesday, while he did go into the political aspects of the decision, it was also to make his colleagues aware of the minute technical issues behind the action.
Mr. Goyal has emphatically denied that India had put in any last minute deal breakers to scuttle the pact. Instead, the reasons were said to be of long-standing and had been consistently on the negotiating table. Among the reasons are some that are already in the public domain – like the threat of circumvention of Rules of Origin due to tariff differentials, where countries take advantage of tariff differentials given to another country, and not offered to it. Also, a long-standing request of India that the base rate of Customs duty be changed from 2014 to 2019, as the RCEP , even if signed in 2019, would be ratified only by 2022, which means that the 2014 base rate would be hugely outdated even for the take-off point of the agreement.
A request was also made for tariff lines to be on an auto trigger safeguard mechanism along with a review clause at a periodicity of three, as India’s experience with free trade agreements (FTAs) has been that it often leads to huge import surges that impair the domestic industry due to dumping.
MFN issue
Most significantly, an exclusion of Most Favoured Nation (MFN) obligations was sought in the investment chapter, i.e, India has given MFN status looking at its strategic interests. “It cannot be anyone’s case that what India gives to its strategic allies or for geopolitical reasons will be handed out to all RCEP countries, including those with whom India has border disputes,” said a government source. Plainly what this means is that without adequate safeguards, the RCEP could end up being an FTA with China through the back door with a huge trade deficit on the Indian side.
The effort was, say government sources, to ask the RCEP to consider the Indian position, and when that was not on, with other member-countries going ahead with signing, Prime Minister Modi felt there was no option but to keep out of the agreement. The government will go ahead with individual FTA negotiations with the U.S. and the European Union, but, clearly, these efforts would be informed by the RCEP experience.
